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Meltdown Hits Transit Agencies

By | | News commentary, Transportation
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Recent news report indicate that up to 30 transit agencies may need to cut service in order to meet payments demanded by banks because of the financial meltdown. These payments are a part of “sell/leaseback” arrangements the transit agencies entered into over the last decade or so as a way to “creatively finance” some of their capital improvements.

Under federal tax law, a private company can get tax advantages from depreciating its capital investments. Public transit agencies are not taxpayers, so they get no such advantages. So, about two decades or so ago, somebody had a great idea: why not sell buses and trains to private investors? They can get the tax benefits from depreciation, and meanwhile they can lease the equipment back to the transit agencies at a rate that accounts for the tax benefit. The investors and transit agencies effectively split the tax benefits.

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Henry J. Kaiser, Industrialist

By | | Entrepreneurs
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For parts I & II, see Henry J. Kaiser, Entrereneur and Henry J. Kaiser: The War Years.

As early as 1942, Henry J. Kaiser publicly worried that the end of the war would see a return to depression conditions, particularly in the West where most of his operations were located. As Mark Foster, one of his biographers, notes, “Kaiser felt a deep personal responsibility for helping maintain prosperity after World War II, particularly in the West.”

Kaiser Industries headquarters in Oakland.

Henry J. Kaiser owned a profitable cement business and a thriving steel operation. While expanding these businesses after the war, he also quickly moved to enter several new industries, including autos, housing, and aluminum. While he certainly hoped to profit in these industries, he also saw them as a way to promote the region’s economic growth.

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Greenspan: Wrong Then, Wrong Now

By | | News commentary
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Some people blame Alan Greenspan’s policy of low interest rates for causing the housing bubble. Why did Greenspan keep interest rates low? “I did not forecast a significant decline” in housing prices, he told Congress yesterday, “because we had never had a significant decline.”

If you fail to look closely at the data, you will come up with the wrong policies. Nationally, we’ve never had a housing bubble. Locally, we had several. But until now, they have been in so few states that they haven’t impacted the national economy.

The above chart shows the ups and downs of two housing bubbles in California, the first peaking in 1980 and the second in about 1990. Hawaii, Oregon, and Vermont also had bubbles at about the same time. By an extraordinary coincidence, these are the only states that had growth-management planning in the 1970s.
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By 1998, more than a dozen states — including Arizona, Florida, much of New England, and New Jersey — had growth-management laws. So when the housing bubble started growing about that time, it affected nearly half of all American housing. Greenspan continued to insist there was no national housing bubble, and he was right. But as Paul Krugman noted in 2005, local bubbles appeared in places that had strict land-use regulation.

Restrictions on housing created shortages that not only made prices go up, they made them more volatile. As the Antiplanner has previously noted, the fact that prices are falling is not an indication of too much supply, but too little.

Low interest rates did not cause the housing bubble, though higher rates might have suppressed it somewhat. Unless we understand what did cause the bubble — growth-management planning — we will adopt the wrong policies and fail to prevent the next one.

Sydney Transit Disaster

By | | News commentary, Planning Disasters, Transportation
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Congratulations to New South Wales for showing the world that it, too, can waste a lot of money building ridiculous rail lines. The Australian state’s Labour government had planned to spend $1.4 billion (all figures in this post in Australian dollars) building a 16-mile line from the suburbs of Chatswood to Parramatta. But local residents protested the line’s routing through a park, so planners decided to put the rail line underground, greatly increasing the cost.

The original plan: Parramatta to Chatswood.

The line now under construction from Epping to Chatswood is only about 8 miles long and the cost is nearly $2 billion. (The $2.3 billion cost quoted in the papers apparently includes interest.) The other 8 miles were postponed because they would cost $1.2 billion and add only 15,000 new riders to the system.

Under construction: Epping to Chatswood.

How many new riders will the $2.0 billion segment add? 12,000. So how does that make sense?

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Henry J. Kaiser: The War Years

By | | Entrepreneurs
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For part I, see Henry J. Kaiser, Entrereneur.

In 1940, Henry J. Kaiser joined with the Todd shipbuilding company to bid on a contract to build 60 merchant ships for the British government, which desperately needed ships to import supplies during the war. Todd would build half the ships in its East Coast shipyards, while Kaiser would build the other half from a yet-to-be-built shipyard in Richmond, California.

Kaiser’s Oregon Shipyard on Swan Island in Portland.

Kaiser, of course, had never built either a ship or a shipyard in his life, but that didn’t faze him. When he told British and, later, American officials how fast he thought he could build ships, they thought he was delusional — no one had ever built ships that fast. Yet he revolutionized the shipbuilding business, bring assembly line techniques to an industry used to custom, one-off designs.

With the help of other members of the Six Companies, Kaiser built seven shipyards in Portland and Richmond capable of building 58 ships at one time. By the end of the war, these yards had built 1,490 ships, an average of about one per day. Most of the ships were the type of merchant ship known as Liberty ships. But Kaiser also built 12 other kinds of ships, including troop transports, landing ship tanks, and escort carriers. In all, Kaiser supplied more than a quarter of all U.S. ships built during the war.

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Hypothetically Optimal Transportation

By | | Transportation
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“What is the optimal relationship between land use and transit,” asks Patrick Condon, “and what transit mode would best support this optimum state?” He concludes that cities should invest more in “trams” (streetcars) rather than in long-distance, higher-speed rail systems.

Flickr photo by NeiTech.

Condon is a professor of landscape architecture at the University of British Columbia, where he is also involved in Sustainability by Design, which is trying to create a sustainable “vision” for the Vancouver region.

Condon’s answers to the above questions differ greatly from from the Antiplanner’s. This is partly because Condon bases many of his calculations on hypothetical numbers rather than actual data, and partly because his definition of “optimal” seems to transmogrify from paragraph to paragraph so that, in the end, it means whatever he wants it to mean.

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Henry J. Kaiser, Entrepreneur

By | | Entrepreneurs
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In the Antiplanner’s not-so-humble opinion, Fortune magazine made a mistake in declaring Henry Ford to be the businessman of the twentieth century. True, Henry Ford made a lot of cars. But Henry Kaiser built roads, dams, houses, hotels, ships, and planes. He made cement, steel, magnesium, aluminum, and a variety of other chemicals and building materials. He funded and built the first and still the greatest health maintenance organization in the world.

Plus, he also made cars. Chances are, you see a car made by one of his former companies just about every time you go out on the street.

To show that Kaiser was the epitome of an entrepreneur, I’ll present Kaiser’s story in four segments: through 1939, the war years, the post-war years, and Kaiser’s Hawaii ventures, with a wrap-up segment about his legacy.

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Brilliantly Smart Growth

By | | Regional planning
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Smart Growth has proven so popular that it is time to talk about the next step, which I call Brilliantly Smart Growth. If housing people in mid-rise, mixed-use developments can measurably reduce their daily miles of driving and carbon footprints, just think what higher densities will do.

The median density of America’s urban areas is less than 2,000 people per square mile, while the average density is 2,700 people per square mile. The densest urban areas have more than 6,000 people per square mile. As the Antiplanner has previously noted, increasing densities by 1,000 people per square mile seems to reduce per capita driving by, at most, 395 miles.

We drive an average of 10,000 per capita, which suggests that densities of around 30,000 people per square mile might eliminate driving. But Manhattan, Brooklyn, the Bronx, and several cities in New Jersey are that dense and people in those communities still drive, so even higher densities are needed to completely eliminate driving.

The Sierra Club once opined that the “optimal urban density” is 500 households per acre. At an average of 2.4 people per household, this equals 1,200 people per acre or 768,000 people per square mile.

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Back in the Air Again

By | | Housekeeping
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James J. Hill’s Legacy

By | | Entrepreneurs
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For parts I, II, and III, see James J. Hill, Entrepreneur, James J. Hill, Empire Builder, and James J. Hill, Conservationist.

In 1912, at the age of 74, James J. Hill retired as chairman of the board of the Great Northern Railway. “Most men who have really lived have had, in some shape, their great adventure,” he wrote in a letter to his friends and employees. “This railway is mine.”

James and son Louis Hill at a Minnesota State Fair. Hill often offered prizes for the best livestock and produce shown at state fairs.

Hill and his wife Mary had nine children including three sons. James was nominally a Presbyterian but Mary was Catholic, and when their eldest son, James N., married a divorced woman, she banished him from the household. That left the second son, Louis, as the heir apparent. (James N. moved to Texas and earned millions investing in the Texas Oil Company.)

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